CSCMP's Supply Chain Quarterly
December 18, 2018
Forward Thinking

Survey: retailers turning to AI to improve demand management

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Artificial intelligence seen as tool for generating more accurate forecasts, Symphony RetailAI says.

One in three retail professionals has incorporated artificial intelligence (AI) capabilities into their supply chain management processes, in an effort to cope with challenges like the slow pace of innovation and the shortcomings of current technology, a survey released today shows.

High-volume retailers face daily information technology (IT) challenges such as disconnected systems, poor demand forecasting accuracy, and the inability of current technologies to support business growth, according to "Strengthening the Retail Supply Chain," a survey of North American retailers produced by logistics technology vendor Symphony RetailAI.

The survey included responses from a range of supply chain leaders from 50 North American retailers, with the majority of respondents coming from large or mid-size grocery organizations.

According to the survey, retailers say AI's greatest potential to improve supply chain management relates to the quality and speed of generating planning insights. Nearly half of all respondents identified "demand management" as one of the top three areas for AI in the next five years. 

The majority of retailers surveyed have confidence in their allocation and inventory planning software, but 48 percent rate their forecasting technology as average to very poor. A key reason for that condition is that many companies are running disparate demand replenishment systems, hamstringing their efficiency. Thirty-six percent of survey respondents indicated that they have separate demand planning, replenishment, allocation, and order management systems for their store and e-commerce orders.

The survey also shows that the pace of innovation is a large challenge, with 43 percent of retail supply chain professionals saying their technology can't keep up with business demands. Forty-two percent describe less-than-optimal synchronization between their inventory and channels, and nearly as many worry about fulfillment complexities, stocking inefficiencies, and high product lead-time.

When they do invest in needed technology, organizations are most inclined to spend on systems that increase stock availability and decrease stock holding, the survey showed. That is because retailers often tend to overstock—in an effort to keep reasonable service levels—but then over-correct and understock instead, according to Dallas-based Symphony RetailAI, which provides artificial intelligence-enabled technology solutions for retailers and consumer packaged goods (CPG) manufacturers.

The impact of that mistake on supply chains is huge, the firm says. According to the survey, 43 percent of respondents say they're challenged by the lack of real-time visibility of all their supply chain inventory. However, six in 10 supply chain professionals say their organization is actively taking steps to address that hurdle and increase inventory visibility.

"Today's retail supply chain is being reinvented because of the complexities of providing goods to customers," Patrick Buellet, chief strategy officer at Symphony RetailAI, said in a statement. "As grocery retail evolves to become more of a destination for shoppers, supply chain efficiency is more critical than ever."

"There's also a constant backdrop of rising cost of goods, which cannot simply be passed on to the customer. And today's increasing focus on fresh and prepared meals adds additional challenges of accurate forecasting to meet customer expectations," Buellet said. "Even though retailers are challenged by the pace of innovation, winners are investing in new technologies, particularly artificial intelligence and machine learning. These can boost productivity, and greatly improve the accuracy of information for better decisions throughout the supply chain."

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